Estate planning issues can create family discord, especially in cases in which there is a sizable inheritance and heirs have disparate circumstances and competing interests.
“You seem to know people,” says Terry Ritchie, director of cross border wealth services with Cardinal Point Capital Management Inc. in Calgary, “but when someone dies and there’s money [involved], their real colours come through.”
Managing delicate family dynamics can be challenging, Ritchie adds, but there is much you can do as a financial advisor to prevent and minimize potential conflict. Ritchie offers the following advice for helping clients keep family peace before and during a wealth transfer:
Encourage open dialogue
Ritchie recommends hosting a family meeting that includes the client and all the beneficiaries of the estate as part of the estate planning process. Heirs who are unable to attend in person can connect by speaker phone or online. The conversation should cover how the wealth transfer will unfold and issues unique to that case that might arise.
As the financial advisor, you are in a position to address family members’ questions about the ins and outs of the wealth transfer. For example, you can field questions that may arise regarding taxes, which can complicate the process, especially if there are cross-border tax issues.
But the level of disclosure you get into — such as the client’s net worth and the distribution of assets — is your client’s call. Ritchie lets his clients decide whether it makes sense for him, as the advisor, to communicate with the family. Once he has the approval to engage the family, he is careful to treat the children equally and be up-front about how he’s helping their parents.
Improve your client knowledge
Expand the scope of your discovery process to include getting to know your clients’ family dynamics. Ritchie usually holds an in-depth conversation with clients about how their children are faring, asking if there are any issues he should be aware of that could complicate the wealth transfer.
For example, Ritchie becomes attuned to the marital status and financial circumstances of his clients’ children, which helps him get a better sense of their motivations. By becoming familiar with your clients’ children, you create an opportunity to continue a relationship with that generation.
“I have a pretty good understanding of the cast of characters I might be dealing with in the future,” Ritchie says. “Many advisors don’t go that deep.”
Take the heat
If your client feels caught in the middle of an intractable sibling rivalry over the inheritance, Ritchie says, help ease the stress by acting as an intermediary.
He has faced situations in which clients’ children want to dictate the terms of how and when the assets will be distributed. In one case, one sibling felt that the wealth was being divided unfairly, because others were receiving a larger portion to include their children.
In such cases, Ritchie will take on the role of “bad cop,” enforcing the client’s expressed wishes and explaining the reasons behind the decision.
When the children prove relentless in pushing for their preferences, he often tells his clients: “Don’t be the bad guy, let me be the bad guy.”